Implementing a filtered term structure model in the South African bond market

Simple item page
dc.contributor.advisorDugmore, Bretten_ZA
dc.contributor.authorRirie, Angelaen_ZA
dc.date.accessioned2014-07-30T17:43:24Z
dc.date.available2014-07-30T17:43:24Z
dc.date.issued2007en_ZA
dc.descriptionIncludes bibliographical references (leaves 72-75).
dc.description.abstractA key feature of the local bond market is that trade is concentrated in a few liquid government bonds. We review and implement the filtered term structure model proposed by Gombani, Jaschke and Runggaldier that defines an arbitrage free pricing system that is consistent with liquid bond prices. The model is derived in two stages called the underlying and perturbed models. The underlying model defines the theoretical arbitrage free term structure. It is assumed to be a multi-factor, affine HNM type model where the stochastic factors satisfy a linear diffusion equation. Gombani et al. argue that the differences between the theoretical and market prices should be interpreted as unobserved errors. The perturbed model the prices of the observed bonds as their theoretical values distorted by noise. Assuming that the information at any point in time is the market prices of a finite number of liquidly traded bonds, the perturbed model is used to derive a continually updated pricing system that is arbitrage free with respect to the observed prices. The method is based on the Kalman filter. We implement a particular three-factor version of the model and calibrate it to the South African market. We discuss the relevant data and numerical and statistical techniques including principal component analysis and yield curve construction. We apply the formulas for pricing European options on zero-coupon and coupon bearing bonds for Gaussian HJM models to the perturbed model and present two examples to demonstrate the application of the model to bond and option pricing.en_ZA
dc.identifier.apacitationRirie, A. (2007). <i>Implementing a filtered term structure model in the South African bond market</i>. (Thesis). University of Cape Town ,Faculty of Science ,Department of Statistical Sciences. Retrieved from http://hdl.handle.net/11427/4357en_ZA
dc.identifier.chicagocitationRirie, Angela. <i>"Implementing a filtered term structure model in the South African bond market."</i> Thesis., University of Cape Town ,Faculty of Science ,Department of Statistical Sciences, 2007. http://hdl.handle.net/11427/4357en_ZA
dc.identifier.citationRirie, A. 2007. Implementing a filtered term structure model in the South African bond market. University of Cape Town.en_ZA
dc.identifier.ris TY - Thesis / Dissertation AU - Ririe, Angela AB - A key feature of the local bond market is that trade is concentrated in a few liquid government bonds. We review and implement the filtered term structure model proposed by Gombani, Jaschke and Runggaldier that defines an arbitrage free pricing system that is consistent with liquid bond prices. The model is derived in two stages called the underlying and perturbed models. The underlying model defines the theoretical arbitrage free term structure. It is assumed to be a multi-factor, affine HNM type model where the stochastic factors satisfy a linear diffusion equation. Gombani et al. argue that the differences between the theoretical and market prices should be interpreted as unobserved errors. The perturbed model the prices of the observed bonds as their theoretical values distorted by noise. Assuming that the information at any point in time is the market prices of a finite number of liquidly traded bonds, the perturbed model is used to derive a continually updated pricing system that is arbitrage free with respect to the observed prices. The method is based on the Kalman filter. We implement a particular three-factor version of the model and calibrate it to the South African market. We discuss the relevant data and numerical and statistical techniques including principal component analysis and yield curve construction. We apply the formulas for pricing European options on zero-coupon and coupon bearing bonds for Gaussian HJM models to the perturbed model and present two examples to demonstrate the application of the model to bond and option pricing. DA - 2007 DB - OpenUCT DP - University of Cape Town LK - https://open.uct.ac.za PB - University of Cape Town PY - 2007 T1 - Implementing a filtered term structure model in the South African bond market TI - Implementing a filtered term structure model in the South African bond market UR - http://hdl.handle.net/11427/4357 ER - en_ZA
dc.identifier.urihttp://hdl.handle.net/11427/4357
dc.identifier.vancouvercitationRirie A. Implementing a filtered term structure model in the South African bond market. [Thesis]. University of Cape Town ,Faculty of Science ,Department of Statistical Sciences, 2007 [cited yyyy month dd]. Available from: http://hdl.handle.net/11427/4357en_ZA
dc.language.isoengen_ZA
dc.publisher.departmentDepartment of Statistical Sciencesen_ZA
dc.publisher.facultyFaculty of Scienceen_ZA
dc.publisher.institutionUniversity of Cape Town
dc.subject.otherStatistical Scienceen_ZA
dc.titleImplementing a filtered term structure model in the South African bond marketen_ZA
dc.typeMaster Thesis
dc.type.qualificationlevelMasters
dc.type.qualificationnameMScen_ZA
uct.type.filetypeText
uct.type.filetypeImage
uct.type.publicationResearchen_ZA
uct.type.resourceThesisen_ZA
Files
Original bundle
Now showing 1 - 1 of 1
Thumbnail Image
Name:
thesis_sci_2007_ririe_a.pdf
Size:
3.66 MB
Format:
Adobe Portable Document Format
Description:
Download
Collections
Masters